The University of New South Wales School of Aviation. AVIA5009 Airline Corporate Management Course Outline

Transcription

1 The University of New South Wales School of Aviation AVIA5009 Airline Corporate Management 2012 Course Outline Course Staff The lecturer in charge is Dr Ian Douglas of the School of Aviation. Ian can be via e- mail at About the Editor/Facilitator Dr Ian Douglas recently completed a Doctor of Business Administration researching the impacts of national economic freedom and state-ownership on airline operating margins. He also holds an MBA and a Graduate Certificate in Educational Studies. Ian worked at Qantas from 1977 to 2003, with roles in airports, marketing, alliances, and strategic planning. In 2003 he joined the strategy group of the School of Management at UTS, before moving to the School of Aviation at UNSW in His aviation consultancy work includes an extensive pricing and revenue management project with Malaysia Airlines, a fleet study for Air Bagan, and strategy work with Thai Airways International. About the Author Rodger Robertson has a Bachelor of Science Degree with First Class honours in Statistics and a Master of Commerce Degree in Econometrics, both from The University of New South Wales. He worked at Qantas from 1965 to 1994, ultimately leading the Company s Corporate Planning Division. He now is an industry consultant to a wide range of clients. Course Information Aims The current structure of the global aviation industry dates back to the 1944 Chicago Convention. That convention, by allowing governments to control air traffic rights established a market for route access (Richards). The airline industry has grown to generate over $US700 billion in annual revenues, but has failed to create a sustainably profitable business model. The industry, in aggregate, falls far short of delivering an adequate return on the capital invested, and has delivered only 3 profitable years since Early results for 2012 indicate another difficult year. Page 1

2 An objective of this course is to introduce the student to the industry and to explain how the industry s history shapes industry structure today 1. This introduction will provide a background understanding of current airline strategies, and the impacts of business model innovation. As with most industries, aviation has a unique set of performance measures and its own jargon and terminology. The airline industry shares the features of other service industries, such as broadcast media, where the perishability of the product is absolute. Once the aircraft door closes, an empty seat is valueless. This problem is addressed by revenue management and pricing tools. A brief outline of the key drivers facing airline corporate management is covered in this course. Particular focus is given to the main revenue drivers, the analysis of costs, and the ability of the management to control both revenue and costs. Each unit of the course is designed to foster closer analysis of individual and specific areas of corporate management, and aims to illustrate the underlying theory with practical and contemporary examples. Airline management teams face highly complex and wide-ranging problems. Airlines require the integration and interrelation of many diverse processes, from fleet management to customer service. Further, the industry is both capital intensive and labour intensive, and faces both long-term planning horizons and short-term market shifts. This course will look at the complexity of the airline organisation interrelationship and the inter-relationship between components of the business. The course then studies individual parts of the organisation and considers each solves its own problems in the broader firm-context. This approach takes the course through the traditional Business Planning Process where annual plans and longer-term plans are integrated. Some planning processes look out to future periods to take account of environmental regulation, technical innovation and structural constraints that are only beginning to emerge. Others address immediate economic conditions confronting the business. Each area studied is intended to engage the student with real issues in the industry. For those students already employed in the broader airline business, the detail in this course should provide an opportunity drill-down into the finer details of the problems and potential solutions. For those outside the industry, the study will encourage cross-industry solutions to be developed. This course interrelates with another AVIA course titled Airline Operational Management. The separation between the courses can be seen as a more Head office focused approach in this course and more field focused approach in the Operational course. The cross interaction is pervasive however, and the two aspects engage simultaneously to achieve an airline s objectives. The way an airline schedules its network tells us a lot about the airline and its strategies and objectives. Hub-based networks rely on building connecting traffic 1 This impact of a firm s history on its current strategy and its options for future directions is often described as path-dependence. Page 2

3 feed and are a characteristic of full-service network carriers (FSNC). Point-to-point operations are adopted by small regional carriers and low-cost (LCC) airlines. Airline online schedules are displayed in a city pair format, so it is often difficult to establish an airline s full timetable online. Airline websites offer more than schedule and price information. Investor pages often hold valuable analysis of the company. Try to stay aware of events in the airline business during this course. Newspapers, magazines, and analyst briefing are useful. For Australian students the best newspapers are the Financial Review and the Friday section in The Australian newspaper. All students can access several aviation magazines through the University Library and this is strongly encouraged. Airline Business and Air Transport World are the best popular management aviation magazines but there are others. Many of the readings from the course are from these sources, so the Library electronic journal databases will be a regular tool during your studies. Much of your communication will be via . Please use your university address for all formal correspondence. The only way to submit assignments is through the Blackboard Bb9 site. Your marks will appear there and you will be able to access an online copy of your report with a marking rubric and comments. The due dates for assignments are shown on the Bb9 site. From time to time I may post additional material through Bb9 usually as a web link. A good practice to adopt when you submit assignments or attachments is to name the file with a unique name. Include your name, the subject number, and the assignment number (e.g. Lee5009a3.doc). Please do not send a file labelled assignment1.doc. Please ensure identification information (name, subject, student number etc) is on the title page of the document. A surprisingly large number of assignments come form Anonymous. Learning Outcomes On completion of this course students should be able to: Have a good understanding of the main airline corporate management tasks. Have an understanding of airline economics. Be able to plan a schedule for a small fleet of aircraft. Be familiar with fleet planning theory and practice. Be familiar with the key airline financial aspects. Have an understanding of key issues in airline marketing management Location This course runs for the duration of Semester 1. The course is delivered electronically via UNSW Blackboard, on a distance-learning basis. The core component of delivery is the course manual. Course manuals are written by experts from various backgrounds within the aviation industry and a cross section of disciplines at UNSW. Each manual has been designed to guide the learner in the most effective and efficient way. As new concepts are introduced, practical exercises are provided so you can develop skills, which can be applied immediately Page 3

4 in your workplace. Students are able to study at their own pace, in accordance with their particular work schedules and locations. Academic review and feedback is delivered via . Learning and Teaching Philosophy This course aims to provide good background and understanding of the main airline operational management tasks. This is done using airline practitioners and real world material. Internet Online content and study materials can be accessed via UNSW Blackboard; Page 4

5 Assessment The MScTech (Aviation) Program s approach to assessment closely follows that of the Australian Open Learning Program of the Australian Graduate School of Management. At all times assessment is intended to form a component of the learning process and assignments are designed to encourage you to apply what you learn to your own organization. Assignments will be assessed on the basis of how you apply subject material to gaining new insight into your organization. Written comments will accompany your return assignments and exercises and should provide useful feedback. The examination will provide you and us with feedback about your comprehension of the subject content. Criteria for Assessment The criteria for assessment of all written work will be: A demonstrated understanding of the concepts and problems studied in the contemporary industry environment. The ability to apply and adapt generalised concepts in the aviation field to problems in your own areas of experience. Concise writing that delivers clear and credible analysis of complex and difficult issues. Outcomes and recommendations that are supported by your analysis, and that reflect originality and openness to creative solutions. All assignments must have a completed cover sheet attached to the front of your assignment. These will be supplied. Assignment length is 3000 words +/-. Your writing needs to be comprehensive enough to cover the material, but brief enough to hold the reader s interest. The use of tables and dot points to summarise data is strongly encouraged. Page 5

6 Academic Honesty and Plagiarism Plagiarism is the presentation of the thoughts or work of another as one s own 2. Examples include: direct duplication of the thoughts or work of another, including by copying work, or knowingly permitting it to be copied. This includes copying material, ideas or concepts from a book, article, report or other written document (whether published or unpublished), composition, artwork, design, drawing, circuitry, computer program or software, web site, Internet, other electronic resource, or another person s assignment without appropriate acknowledgement; paraphrasing another person s work with very minor changes keeping the meaning, form and/or progression of ideas of the original; piecing together sections of the work of others into a new whole; presenting an assessment item as independent work when it has been produced in whole or part in collusion with other people, for example, another student or a tutor; and, claiming credit for a proportion a work contributed to a group assessment item that is greater than that actually contributed. 3 Submitting an assessment item that has already been submitted for academic credit elsewhere may also be considered plagiarism. The inclusion of the thoughts or work of another with attribution appropriate to the academic discipline does not amount to plagiarism. Students are reminded of their Rights and Responsibilities in respect of plagiarism, as set out in the University Undergraduate and Postgraduate Handbooks, and are encouraged to seek advice from academic staff whenever necessary to ensure they avoid plagiarism in all its forms. The Learning Centre website is the central University online resource for staff and student information on plagiarism and academic honesty. It can be located at: The Learning Centre also provides substantial educational written materials, workshops, and tutorials to aid students, for example, in: 1. correct referencing practices; 2. paraphrasing, summarising, essay writing, and time management; 3. appropriate use of, and attribution for, a range of materials including text, images, formulae and concepts. Individual assistance is available on request from The Learning Centre. Students are also reminded that careful time management is an important part of study and one of the identified causes of plagiarism is poor time management. 2 Based on that proposed to the University of Newcastle by the St James Ethics Centre. Used with kind permission from the University of Newcastle. 3 Adapted with kind permission from the University of Melbourne. Page 8

7 Students should allow sufficient time for research, drafting, and the proper referencing of sources in preparing all assessment items. Course Content Units should be done in the corresponding course week, i.e. the course is a 12-week course with one Unit being achieved in each week. Unit 1 Unit 2 Unit 3 Unit 4 Unit 5 Unit 6 Unit 7 Unit 8 Unit 9 Unit 10 Unit 11 Unit 12 Introduction to the Aviation Industry - Past and Present Aviation Statistics Airline Economics - Demand Airline Economics - Costs Airline Business Planning Process Schedule Development Fleet Planning Forecasting Finance External Relations Commercial Agreements Marketing and Distribution The 12 units follow the outline above. The unit headings give a reasonable indication of the content of the unit. Units vary slightly in length and in terms of effort. The objective is to cover a lot of ground and get some understanding of many subjects. Sometimes depth suffers a little in achieving the breadth of the subject. Some Unit topics could form subjects in their own right. Do not be too concerned if some Units seem to be too big. Get as much as you can out of it and move on. Reading material is generally labelled essential or reference. The former is self-explanatory and the latter can be studied in the course or simply kept as a reference for later reading. The course introduces (in units 1 and 2) the aviation industry and briefly studies its regulatory environment and economic drivers. These two Units have considerable content that forms the basis for the following Units. You may find that you return to these introductory Units throughout the course. Units 3 and 4 deal with the economic decisions required in the business. Demand side issues are studied in Unit 3. Then the costs of operation and some simple work on profit planning are covered in Unit 4. Page 9

8 Unit 5 addresses the major planning processes for an airline. The approach considers the airline business environment and scenario planning to support a classical development of a strategic business plan and budget. This unit adapts generic strategic management processes to the airline environment. Units 6 and 7 take in two further major processes in the airline. The development of the airlines schedules is fundamental to operations. Delivering the schedule is the driver of both revenue and expenditure for an airline. In airline planning terms, the development of schedules is a core task, and drives the expenditures and strategies of operational managers. Scheduling is covered in Unit 6 and you should be able to do some simple aircraft scheduling at the end of the unit. For large carriers scheduling is automated, and the schedule is built around constraints including slot availability, airport curfews as well as customer demand. Unit 7 covers the Fleet Planning process. This process will give you an understanding of the evaluation of aircraft in terms of their performance (both cost and physical) and their revenue generation potential. Trade-offs are often required between fleet complexity and the acquisition of ideal aircraft types for particular markets. Unit 8 discusses forecasting in the airline, with a particular focus on traffic and revenue forecasting. Unit 9 offers an overview of Airline Finance issues. It is not designed to be an indepth study of financial management, but rather to identify the special issues which airlines face in a pragmatic way. Unit 10 studies the airline s external relations. Engagement with Governments, as well as with important suppliers, alliance partners, and the media shape an airline s results. Unit 11 deals with the Globalisation of the industry. The role of Strategic Alliances and Commercial Agreements (both short and long-term), cross-border ownership, and regional trading blocs such as the European Union are considered in this Unit. Unit 12 is an overview of Airline Marketing. This Unit does not attempt a full study of the marketing function, but addresses the impact of online selling (both web and mobile) on FSNC and LCC business models, and the impact of the move towards the mobile distribution channel. Each unit includes readings. The readings are offered either as links, or as a separate pdf file. Online Resources Most of the necessary background reading material can be sourced through the library s extensive journal databases online. Suggested reading material directs students to useful websites, but self-directed research beyond the recommended Page 10

9 reading is an important part of the learning process. Wider reading adds a variety of opinions, richer content to the subject, and the opportunity to contrast theoretical and practitioner views of the industry. Instructions for using the databases are available on the UNSW library website The page includes a direct link to the Sirius database homepage. Industry journals Air Transport World and Airline Business can both be accessed using the UNSW Library electronic access. Textbooks There are no set textbooks for this subject but there are some books that are useful references in airline management. These are Rigas Doganis- Flying Off Course- The Economics of International Aviation. Stephen Holloway- Straight and Level- Practical Airline Economics- 3rd edition Alexander Wells- Air Transportation edition. This is a book written from a US perspective. Peter Morrell Airline Finance 3 rd edition Paul Clark Buying the big Jets 2 nd edition 2007 Introduction to Air Transport Economics Bijan Vasigh, Ken Fleming, Thomas Tacker 2008 Report Writing Report writing standards and requirements are very varied in the University environment and within industry and Government. It is not expected that students will be perfect in this area. The standards in this course are similar to the author s experience in producing action-orientated papers for a Company Board s approval. The standards for referencing etc are not important as long as you do use quotes where appropriate and acknowledging of others ideas. Continual Course Improvement Periodically, student evaluative feedback on the course is gathered, using among other means, UNSW's Course and Teaching Evaluation and Improvement (CATEI) Process. Student feedback is taken seriously, and continual improvements are made Page 11

10 to the course based in part on such feedback. Significant changes to the course will be communicated to subsequent cohorts of students taking the course Administrative Matters The course will be administered through UNSW Blackboard. This site can be accessed from You then enter your student id and zpass. The course material is there plus any additional material that the author puts there. Your assignments should be uploaded on to the website and all questions directed through the mail system. The Facilitator will use the course site to make announcements and to mark the assignments and answer questions. For those of you in Sydney and able to get along to the University there is a somewhat parallel undergraduate course called AVIA3101 Airline Management. It is held on Thursdays and If you wish to attend then either turn up or me beforehand to check the location and to ascertain that there is a talk that session. As well as some of the authors of this course, there are other guests from industry who come and deliver guest talks to the students. If possible it is good to attend- you meet some of the authors and get a real feel for the lectures etc. I will advertise the program on the Blackboard website for AVIA5009. Students should be familiar with the information contained in regarding expectations of students, assignment submission, examination procedures, equity and diversity and other policies that affect you. A Postgraduate Aviation Student Guide can be obtained from the School of Aviation which is also available on UNSW Blackboard. Please contact Jamie Lim at: jamie.lim@unsw.edu.au for any administrative enquiries. Acknowledgment Acknowledgment for assistance and material is made to the Finance, Fleet Planning, Commercial Agreements, and Freight departments at Qantas, Boeing Commercial Airplane Company, International Air Services Commission. Also acknowledged is Max Haworth for writing the Finance Unit and Jim Eames for the External Relations Unit. Both Max and Jim had long and distinguished careers at Qantas. Their contribution to the formal material and to advice on the content of the course has been invaluable. Page 12